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Ofcom accepts undertakings from Board of BT Group plc on operational separation

22 September 2005

22 September 2005

BT access services business – Openreach – formally established today

The Ofcom Board has formally accepted legally-binding undertakings from the Board of BT Group plc. The undertakings, which were offered to Ofcom in June 2005, were subject to consultation over the summer. They create a new regulatory approach to the access infrastructure operated by BT in the UK.

Separately, BT has today announced the establishment of its new access services business - Openreach.

Undertakings

In more than 230 separate undertakings, the Board of BT Group plc has agreed to substantive structural, product and governance changes, affecting both its current and future networks.

Ofcom believes the undertakings will:

1. allow all communications providers to gain real equality of access to critical BT infrastructure on fair and equal terms, encouraging investment in infrastructure and enabling innovations through multiple services and the increasing deployment of next-generation technology;

2. lead to lower prices and greater choice of products and services for consumers and businesses; and

3. help to underpin the UK’s industrial and economic competitiveness in the future.

Ofcom Chief Executive Stephen Carter said: "After a full year of detailed consultation, Ofcom has accepted BT’s commitments. The new management of Openreach and the Equality of Access Board must now deliver - and be seen to deliver."

He added: "Ofcom is hopeful that this new approach to competition regulation will stimulate investment, innovation and sustainable growth in this critical industrial sector."

Over the summer Ofcom consulted on a set of undertakings offered by the Board of BT Group plc. The undertakings accepted today are largely unchanged, but as a result of the consultation a number of changes have been made on matters of detail. The most significant changes include:

The undertakings now make it clearer that Openreach is expected to be the primary sales channel for its own products, and that it may only sell to communications providers, not to end users. Similarly, the role of BT Wholesale has been clarified.

The Chinese Wall provisions between Openreach and BT Group plc have been modified and now include a number of additional conditions. For example, no employee of Openreach may share customer confidential information with any other part of BT or attempt to influence commercial policy. The Chinese Walls within BT Wholesale similarly contain a number of additional conditions.

The undertakings now make it clear that communications providers can use Openreach’s backhaul products in a number of different ways. Backhaul is the part of a telecoms network that connects local exchanges to the long distance telecoms network.

The undertakings now make it clear that, should BT wish to develop a replacement for the Wholesale Line Rental product (which is based on access to Multiple Service Access Nodes), then Ofcom and BT should first agree what (if any) inputs to that product should be made available on an equivalent basis to other communications providers.

In the June undertakings the provision of Partial Private Circuits was effectively split between Openreach and BT Wholesale. The undertakings now make these arrangements more practical; Openreach will manage two new products which will be available to other communications providers, and the costs attributable to these new products will form part of the costs of BT’s Partial Private Circuit product.

The undertakings provide more detail on the basis of the preparation of Openreach’s management accounts.

Ofcom published Phase 1 of the Strategic Review of Telecommunications in April 2004. Phase 2 was published in November 2004. In June 2005 the Board of BT Group plc offered draft undertakings to the Board of Ofcom. The undertakings were subject to consultation over the summer and were formally accepted in September 2005.

Ofcom is the independent regulator and competition authority for the UK communications industries, with responsibilities across television, radio, telecommunications and wireless communications services.